5 key tips to minimize charge offs
While financial institutions are no strangers to bad debt, technology and best practices are constantly evolving. Kelly Johnson, the lead engineer at Lockheed Martin, coined the phrase “keep it simple stupid”. Credit and collection managers aren’t building spy planes that travel at 3x the speed of sound, but the process to success remains the same.
- FRONT END STAFF/ DATA COLLECTION: Your front-line team is the face of your organization. They are responsible for most of the interaction between the institution and members. It is critical they are constantly updating member contact and employment info. If your front-end team is proactive, your back-end team will see greater results.
- MEMBER CONTACT-EARLY AND OFTEN: Staying in front of your delinquencies is essential. Contact members as quickly as possible. For most, this is around 7-10 days after a missed payment. Yes, letters have their place in our world, but a live person on the phone gets paid. 4-8 contact touches (VM, letters, calls) should occur in every age bucket up to charge off.
- DON’T CHASE NON-PAYING ACCOUNTS: The number one rule in debt collection (after “ask for the money”) is to keep communicating. Situations change over time, and a pattern of established communication goes a long way. On the other hand, a collection representative must know when to move on and devote resources to members looking to cure their account. Wasting time on dead money allows good money to slip through the cracks.
- BE DIRECT AND CLEAR-CONSEQUENCES: It is very important to inform your members about the consequences of non-payment during this process. A member being surprised by an account holds, or unexpected late/penalty fees can discourage additional communication. Also, creating an additional sense of urgency pre account hold or penalty can generate payments.
- CHARGE-OFF/PLACE WITH AGENCY: Tip #2 doesn’t just apply to pre-charged-off accounts. The same principle is true for agencies handling your delinquent loans. If we have gotten to this point, it’s very possible you aren’t the only organization your member is delinquent with. Accounts placed between days 180-365 from the date of service have a much higher recovery rate than the same accounts placed 365+.
If you’ve made it this far, I hope you enjoyed this blog. CBHV is a family-owned and operated Collection Agency proudly serving the lending industry for over 40 years. Professional US-based call center located in Newburgh NY, our fully compliant, secure, and stable environment is devoted to developing specialized analytics combined with cutting-edge communication technology, designed to help all financial institutions achieve success by quickly obtaining customer contact and resolutions.
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